What's the Greenest Building? The Problem With Ranking Systems

The huge role of policy in solving the world's environmental problems suggests that corporate activism should be considered in all best-of lists

What if there was a building that was so "green" that it was awarded the well-regarded Silver LEED rating? And what if that building housed a company that, among other things, was spreading disinformation about climate science that was undermining public support for climate-change regulations and the U.S. EPA? A fairly basic question would come to mind: is that building really green?

Actually, such a building exists. It's the New York City headquarters of News Corp, where Rupert Murdoch runs an empire that is "set up to deny, deny, deny" the most pressing environmental issue of our time -- climate change -- according to Rolling Stone. The magazine reported last winter that News Corp's "Wall Street Journal routinely dismisses climate change as 'an apocalyptic scare,' and Fox News helped gin up a fake controversy by relentlessly hyping the 'climategate' scandal'" -- even though multiple independent investigations showed that nothing in the scientists' emails undermined their conclusions about global warming.

Including advocacy in criteria will make rankings more accurate, but will also steer consumers and investors in a positive direction.

Despite all this, the question of whether News Corp's building deserves its prominent green rating could be easily dismissed. LEED rates buildings, not the advocacy of its occupants.

Well, fair enough. But following that line of thinking, neither is it the job of corporate ranking systems (like the one released in Newsweek this week) to measure anything but operational greenness -- how a corporation deals with solid waste, maximizes energy efficiency, and avoids smokestack pollution on their sites, and in some cases in their supply chains. So, for example, News Corp. came in at number 234 this year among the 500 U.S. companies Newsweek ranked. Its ranking hardly suggests that this business carries more responsibility than almost any other in preventing policy solutions to the climate crisis. And earlier this year, News Corp.'s climate change performance was given a AAA rating, the highest possible score provided by MSCI ESG Research's Global Socrates, another major rating scheme.

The world is facing huge environmental problems, and climate change is the marquee. The Intergovernmental Panel on Climate Change calls for CO2 reductions of 80-95 percent below 1990 levels by 2050. That aggressive target offers just a 50/50 chance of preventing a global average temperature rise of 2 degrees C, beyond which millions are put at risk of drought, hunger, and flooding. What's necessary to fix climate change is a radical recreation of society as we know it, from how we use and generate energy to how we tax pollution and encourage efficiency. The problem is so big, and so inclusive, that it can't be solved by ad hoc voluntary actions. Even if every corporation or individual so inclined undertook the full menu of climate fixes, we'd still fail to solve the problem by many orders of magnitude because business-as-usual would remain the norm on a global level. Only large-scale policy change can fix that. Therefore, an exclusive focus on voluntary operational greening -- by businesses or by rating agencies -- risks distracting from the far greater need for the big fix.

Compared to companies' efforts to green their own operations, political actions -- like campaign funding, or lobbying Congress or the court of public opinion -- can have a vastly greater influence on environmental protection, and arguably represent the biggest impact a company can have on the environment. In fact, the very existence of a debate on climate science in the United States, and consequent lack of policy action, has been attributed to massive corporate support for the "denial industry," as detailed in Naomi Oreskes and Erik Conway's book Merchants of Doubt. The U.S. Chamber of Commerce, for example, spent $132 million on lobbying in 2010, more than any other entity, and opposed all climate legislation. Corporate influence on government policy will only increase after last year's Citizens United Supreme Court case, which allows corporations to spend unlimited amounts on elections.

The primacy of policy in solving the world's environmental problems suggests that corporate activism should be considered in all corporate environmental rankings. Ignoring advocacy is like rating colleges based on their buildings and infrastructure while ignoring the quality of educational content.

It's certainly feasible: some metrics already exist. For example, ratings could reward companies that take leadership positions, such as when Pacific Gas & Electric (PG&E) quit the U.S. Chamber of Commerce, citing its "extreme position on climate change." Corporate Responsibility's 100 Best Corporate Citizens already credits companies that are members of the U.S. Climate Action Partnership, a group calling for the U.S. government "to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions," though this is just one of the 324 factors considered. Ratings could also penalize companies for belonging to organizations that undermine climate change regulation. Would IBM still be Newsweek's #1 ranked U.S. company if the rankings weighed the fact that IBM is not only a member, but a board member, of the U.S. Chamber of Commerce? Rankings could also account for corporate campaign contributions to politicians who deny that climate change is a problem, as the Climate Action Network Europe did last year based on data publicly available from the Center for Responsive Politics. In the end, any sort of environmental ranking -- from LEED to ISO 14001, the world's most respected certification of environmental management -- should include corporate activism and influence in its assessment.

Including advocacy in their criteria will not only make rankings more accurate, but will also be good for the planet by steering consumers and investors in a positive direction -- along with rated companies themselves. Businesses respond to negative ratings.

Just one last question comes to mind: Suppose the corporation in the green building is ranked highly not only on its operational efficiency but also on its advocacy, as it should be. And what if that company's business is mining coal?

Auden Schendler is vice president of sustainability at Aspen Skiing Company, and author of Getting Green Done. Michael Toffel is associate professor at Harvard Business School. He teaches an MBA elective on corporate environmental strategy.
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Auden Schendler is vice president of sustainability at Aspen Skiing Company, and recent author of
Getting Green Done: Hard Truths from the Front Lines of the Sustainability Revolution and several
Harvard Business Review articles on corporate environmental strategy.
Michael Toffel is associate professor at
Harvard
Business
School. His research examines the
effectiveness of environmental management practices within companies’
operations and supply chains, and he teaches an award-winning MBA
elective on corporate
environmental strategy.